Rs 120-bn GST evasion detected between Apr-Nov despite e-way bill mechanism

The government has detected GST evasion worth Rs 120 billion in 8 months till November, a senior tax official said Wednesday.

Central Board of Indirect Taxes and Customs (CBIC) member John Joseph said despite the electronic way or E-way bill mechanism there has been rampant evasion and there is a need to increase compliance.

"We started anti-evasion measures from April onwards, and from April-November we have detected Rs 120 billion of GST evasion. This is huge compared to what happened in central excise or service tax side. There is huge evasion. There are smarter guys outside who knows how to pocket the money," Joseph said addressing an Assocham event.

Joseph, who looks after investigation in the CBIC, said almost Rs 80 billion worth GST evasion has been recovered by the tax officials.

Goods and Services Tax (GST), which subsumed 17 local taxes, including excise duty and service tax, was introduced on July 1, 2017. Since it was a new tax, the government had decided to go slow on enforcement action in the initial months of its implementation.

Joseph said only 5-10 per cent of the 120 million assessees are evading GST and bringing a bad name to the industry. "We need to improve compliance mechanism."

On industry concerns as to whether a change in government might lead to an overhaul of the GST process, Joseph said: "With all the apprehensions that you have, whether the election results are going to be bad for the GST or not, I can tell you very clearly that the same politicians whether in opposition or ruling party, they all came together to conceive this.

"There may be some changes in law, some procedural changes can definitely happen, but it will not be lock, stock, and barrel as in the case of Malaysia."

He said the GST Council, comprising the Centre and states, had taken all decision relating to the new indirect tax regime.

The CBIC member also said the new GST return forms will have a beta version initially, so that industry has enough time to suggest what could be done to improve the quality of returns.

In July, the CBIC had put up in public domain draft GST return forms 'Sahaj' and 'Sugam' and sought public comments. These forms will replace GSTR-3B (summary sales return form) and GSTR-1 (final sales returns form).

The new forms are slated to be launched in April 2019.

With regard to industry concerns over varied orders passed by the Authority for Advance Ruling (AAR), Joseph said the Centre was pushing for a national bench for AAR but it hit the roadblock as the bench was required to have about 40 members with representations from every state.

"I do agree, there is a real serious issue in that (Advance Ruling). The Centre is trying to push that there has to be a single advance ruling authority but unfortunately think about a situation where every state says I have equal right as the Centre. So, think about a situation where a national bench is constituted with 39/40 people sitting, how do you think it will work. That is where the problem is coming in," Joseph said.

He said even for setting up regional benches there is a huge disagreement between the states.

Currently, what the government is doing is they are going through the entire thing, studying the issue and then issuing a clarification, the member noted.

"Once the clarification is issued, the entire advance ruling thing becomes null and void. For some time, you have to adjust to that situation till a trust is developed between the Centre and states," Joseph added.

As per the law, all states are required to set up at least one AAR for seeking advance ruling over GST levy and one appellate authority to hear appeals against the AAR order.

In March, the New Delhi bench of the AAR had held that duty-free shops at airports are liable to deduct GST from passengers. However, these shops were exempt from service tax, and Central Sales Tax in the earlier regime.

Further, the solar industry too was left in a vexed situation when the Maharashtra AAR said that 18 per cent GST rate would be levied for installation works, but the Karnataka-bench of AAR passed an order levying 5 per cent GST on the same.

On concerns over availing input-tax credit, Joseph asked the industry to submit their representations, backed by data, along with suggestions.